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Guy Kawasaki :Play to win and win to play

“Play to win and win to play. Playing to win is one of the finest things you can do. It enables you to fulfill your potential. It enables you to improve the world and, conveniently, develop high expectations for everyone else too. And what if you lose? Just make sure you lose while trying something grand. Avinash Dixit, an economics professor at Princeton, and Barry Nalebuff, an economics and management professor at the Yale School of Organization and Management, say it this way: “If you are going to fail, you might as well fail at a difficult task. Failure causes others to downgrade their expectations of you in the future. The seriousness of this problem depends on what you attempt.” In its purest form, winning becomes a means, not an end, to improve yourself and your competition. Winning is also a means to play again. The unexamined life may not be worth living, but the unlived life is not worth examining. The rewards of winning – money, power, satisfaction, and self-confidence – should not be squandered. Thus, in addition to playing to win, you have a second, more important obligation: To compete again to the depth and breadth and height that your soul can reach. Ultimately, your greatest competition is yourself.” (more…)

How would you classify trading errors?

TRADINGERROR

  • Improper analysis, categorized as inadequate preparation or incorrect interpretation
  • Improper entry (early or out of sync with market and sector action)
  • Improper execution (inappropriate position size, failure to adhere to proper trading principles, e.g. momentum resumption)
  • Failed exit, e.g. profit turns into a loss, failure to recognize ‘windfalls’, etc.

So what ‘rules’ must we have.

  1. Identify your edge (specific market, specific techniques)…if making money on the short (long) side isn’t working, why persist at that which isn’t making it happen? Strive to do more of what is working and less of what is not.
  2. Trade with the market. Intraday ‘tells’ are huge. If breadth is negative and the dollar is positive, going long equities is going to be tough sledding.
  3. See the market as it is. If we’re wrong, having missed the exit ramp, are we going to stay on the highway into the next state, or get off?
  4. Understand the market structure. Is the market trending, detrending, breaking out of consolidation, bouncing off support or resistance, consolidating?
  5. Know how volatility is behaving…rising, falling, at extremes.
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